Entrepreneur mortality, Part 1
According to the SBA, more than 500,000 firms “die” each year (approximately 10% of the total amount of firms1) in the US, the bulk of which have less than 20 employees2. This mortality corresponds to some pretty tough attrition rates for entrepreneurs: “44 percent [of new establishments] were still in existence 4 years [after their birth]“3 – which means that over half didn’t make it. Furthermore, most of the factors related to firm closure fall under the entrepreneur’s purview (as in, they are not due to external forces) – sometimes summarized as Money, Management, and Marketing. 4,5,6,7
This is supported by research indicating that entrepreneurs are more cavalier about their capacity than they are about the business risks they face:
The research shows that entrepreneurs, while risk averse in their role as risk-bearers, are willing to bear economic risk when overconfidence compensates for their aversion.8
But is it the same in alternative markets?
Let’s recall that there are many less entrepreneurs per capita off the beaten path, and that their mortality is much lower than in developed markets. If we eliminate what the Global Entrepreneurship Monitor (GEM) calls necessity entrepreneurs (most of which work in the micro enterprise sector – see Poor entrepreneur post) and concentrate on the “opportunity entrepreneurs”, aside from a dire dearth of data, we’ll notice very similar anecdotal evidence – most of the trouble that entrepreneurs face, is self inflicted and therefore, perfectly avoidable.
